Shell says it will cease Alaska offshore Arctic drilling

Shell Oil Co. President Marvin Odum gestures while speaking to The Associated Press on Tuesday, Sept. 2, 2015, in Anchorage, Alaska. He says exploratory drilling is going well in the Arctic Ocean despite stormy weather last week that caused the company to halt operations for a few days.

ANCHORAGE, Alaska  — Royal Dutch Shell will cease exploration in Arctic waters off Alaska's coast following disappointing results from an exploratory well backed by billions in investment and years of work.

 

The announcement was a huge blow to Shell, which was counting on offshore drilling in Alaska to help it drive future revenue. Environmentalists, however, had tried repeatedly to block the project, and welcome the news.

Shell found indications of the oil and gas in the well in the Chukchi Sea about 80 miles off Alaska's northwest coast, the company said Monday in a release from The Hague, Netherlands. However, the petroleum was not in quantities sufficient to warrant additional exploration in that portion of the basin, the company said.

"Shell continues to see important exploration potential in the basin, and the area is likely to ultimately be of strategic importance to Alaska and the U.S.," said Marvin Odum, president of Shell USA, in the announcement. "However, this is a clearly disappointing exploration outcome for this part of the basin."

Shell will end exploration off Alaska "for the foreseeable future," the company said.

The decision reflects the results of the exploratory well in the Burger J lease, the high costs associated with Alaska offshore drilling and the challenging and unpredictable federal regulatory environment in offshore Alaska, the company said.

Shell has spent upward of $7 billion on Arctic offshore development in the Chukchi and Beaufort seas.

Monday was Shell's final day to drill this year in petroleum-bearing rock under its federal permit. Regulators required Shell to stop a month before sea ice is expected to re-form in the lease area.

The company reached a depth of 6,800 feet with the exploratory well drilling in about 150 feet of water.

Environmental groups oppose Arctic offshore drilling and say industrial activity and more greenhouse gases will harm polar bears, walrus and ice seals.

Over the summer, protesters in kayaks unsuccessfully tried to block Arctic-bound Shell vessels in Seattle and Portland, Oregon.

 

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